IKEA profits surge as hard-up home decorators the world over opt for flat-pack frugality

IKEA reported rising profits, as hard-up home decorators the world over opted for flat-pack frugality over designer homeware.

Total group sales at the Swedish furniture giant rose by 9.5 per cent to nearly £23bn, including the impact of 11 new stores, boosting net profit by 8 per cent to £2.7bn for 2012.

IKEA said it had sacrificed profit margins by cutting the price of its products by 0.8 per cent despite the fact that it was also squeezed by a 7.9 per cent increase in its costs.

But although costs were up, they fell as a percentage of sales, thanks to a revenue boost from customers turning to IKEA for cut-price ways to beautify their homes amid economic stagnation.

The effect of customers seeking a bargain was particularly great because 70 per cent of IKEA’s sales are in Europe, which has been hit hard by the downturn.

‘The IKEA business idea is more relevant than ever,’ boss Mikael Ohlsson, adding that ‘people around the world are more value conscious’.

IKEA did not break out detailed results by country, but said last November that UK sales rose by 6.3 per centc to hit £1.23bn, about 5 per cent of its latest worldwide sales figure.

The fastest growing markets were China, Russia and Poland, closely followed by the US and Germany, IKEA’s top two countries by revenue.

During the year, the group opened 11 stores and hired 8,000 people, taking its global workforce to 139,000. It welcomed some 690m visitors to its stores, while a further one billion visited its website, a 22pc increase on the 870m who did so the previous year.

IKEA also took the opportunity to display its green credentials, after committing to spend £1.3bn on renewable energy, with the aim of generating 100 per centc of its own electricity by 2020.

By the end of 2012 IKEA had installed 250,000 solar panels and invested in 126 wind turbines in six countries.